Is Cisco Seeking Security?

Cisco Systems Inc. (Nasdaq: CSCO) could soon upgrade its wireless LAN security offerings once again with another acquisition or more partnership deals, according to industry sources.

One source familiar with the industry says Cisco's recent acquisition of Perfigo Inc. and its decision to open up some software interfaces to wireless LAN security partners like AirDefense Inc. are signs of the network giant's decision to rethink its wireless LAN strategy (see Cisco Picks Up Perfigo and Cisco Leans on AirDefense).

"Embracing ISVs [independent software vendor] has made them revisit their whole strategy," says the source.

Wireless LAN switch vendor Aruba Wireless Networks is seen by some as a potential acquisition target for the networking hulk.

"Cisco is going to buy Aruba," another source tells Unstrung. He notes that since Aruba brought ex-Cisco cheese Don LeBeau on board as CEO last year the company has steadily moved towards becoming a security firm (see Juniper Buys NetScreen, LeBeau Dons Aruba Crown, 'Switch' CEOs Sound Off , and Aruba Targets Wired World).

Craig Mathias of analyst and consulting firm Farpoint Group -- while stressing that he hasn't heard anything specific about more Cisco M&A activity -- thinks, in general, a switch acquisition could make a lot of sense for Cisco as it moves towards a more centralized security architecture for wireless LAN networks (see Cisco Switches On). Such an acquisition could give Cisco "a lower entry price" for centralized wireless LAN systems than it can currently offer with its Catalyst 6500 switch product, Mathias notes.

For its part, Aruba is denying the rumor. "We're not getting bought by Cisco," says David Callisch, communications director at Aruba.

Indeed, other industry scuttlebutt has it Cisco has already kicked Aruba's tires once and walked away. "They looked at Aruba very hard six months ago, but the two parties couldn’t agree on price," says a third source, who thinks the startup's backers are looking for around $300 million (see Aruba: No Sale in the Offing).

Indeed, no one Unstrung spoke to could agree on just how much money would constitute an offer too good for Aruba to refuse. Estimates varied from $300 million on the high end, to a low-balling $120 million from a source that claims Aruba is "hemorrhaging badly" after the loss of its CFO and other execs (see Aruba Loses CFO, VP, Aruba's Foss Loss, and Aruba Founder Switches Off).

But Cisco, like other major players, seems to be concentrating on adding elements to its wireless LAN ecosystem by swooping in on young startups it can get for relatively reasonable valuations. For instance, Cisco paid $74 million in cash for Perfigo. Meanwhile Siemens AG (NYSE: SI; Frankfurt: SIE) is said to have paid around $85 million for second-wave switch startup Chantry Networks Inc. last week.

So, if Cisco is hunting down potential security targets -- and Aruba is out of the picture -- this could put others like erstwhile Cisco partner AirDefense, AirMagnet Inc., or WildPackets Inc. (which is said to have developed its AiroPeek wireless sniffer tool at Cisco's request) in the frame (see AirDefense Secures Cisco?).

"I have no information I can confirm or deny," says a spokeswoman for AirDefense on the M&A talk.

WildPackets also declined to comment and AirMagnet had not replied to our inquiry by press time.

Cisco has nothing to say on any of this.

"Cisco does not comment on future acquisition prospects," writes a spokeswoman in an email reply to questions. "We evaluate acquisition opportunities on a case-by-case basis."

— Dan Jones, Site Editor, Unstrung and Gabriel Brown, Chief Analyst, Unstrung Insider

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